Kronotex, Floors Today Litigation Ends

Miami, FL, Sept. 30, 2008--Flush with millions from the sale of a chain of laminate- and hardwood-flooring stores in the United Kingdom, brothers Robert and Richard Hodges and their father tried to duplicate that success in the United States, according to a story in the Miami Herald.

The Hodges family established a beachhead in Miami in 2005 and embarked on opening 66 Floors Today stores in Florida and other parts of the Southeast.

But Floors Today unraveled faster than it expanded. Parent company Laminate Kingdom was pushed into bankruptcy by some of its creditors less than two years after launch. More than 650 creditors claimed they were owed at least a combined $19 million.

At the time of the January 2007 filing, explanations for Floor Today's collapse ranged from the housing downturn to an overly aggressive growth strategy.

Lawsuits, though, paint a different picture of Floor Today's downfall, the newspaper said.

Kronotex U.S.A., which held a 25 percent stake in Laminate Kingdom, accused Robert and Richard Hodges and their father, Robert, of being absentee owners who lived ''like celebrities.'' The three dined at expensive restaurants, traveled in chauffeured limousines and drove pricey cars -- all at company expense, Kronotex alleged. The supplier sued them for approximately $10.6 million.

The three Hodges countered that Kronotex was only using Floors Today as an outlet for its products until Kronotex could score a $100 million-plus annual supply agreement with the giant home-improvement chain Lowe's. The trio sued Kronotex for more than $13.5 million in damages.

The bankruptcy trustee assigned to oversee the Floors Today case filed a similar suit against Kronotex, accusing it of fraud in failing to honor a commitment to give preferential pricing to Floors Today while also secretly working with Lowe's. Kronotex's actions caused Laminate Kingdom at least $20 million in injury, trustee Barry Mukamal alleged.

The morass of litigation all came to an end last week when a bankruptcy order approving a settlement became final. Under the agreement, the bankruptcy estate will receive about $6 million. Millions more in claims that Kronotex and the family filed against the estate have been dropped.

Before Floors Today, the Hodges family built Floors-2-Go into Britain's largest retailer of hardwood and laminate flooring. The chain had 104 stores before the family decided to sell it in 2004. Robert Hodges and his sons contemplated retiring, according to their suit, until they were swayed by Kronotex to launch a similar venture in the United States.

Kronotex had a major motivation for wanting them to open U.S. stores, the family claimed. Floors Today would sell laminate manufactured by a new Kronotex plant in South Carolina.

Kronotex said in its suit that it agreed to invest $1 million in Laminate Kingdom, and provide $3.5 million in cash and $4 million in inventory in exchange for a 25 percent interest in the Miami company.

Floors Today's business plan was simple: Rely on favorable pricing from Kronotex for flooring to compete with Lowe's and other large home-improvement stores.

But within about four months of Kronotex taking a stake in Laminate Kingdom, the family alleged, Kronotex was positioning itself to land a huge supply contract with Lowe's. Kronotex began raising prices for Floors Today, which the family claimed was destroying Floors Today's business. Kronotex had made assurances that prices would go back down once its new plant was operational, trustee Mukamal asserted in his suit against Kronotex.

But Kronotex blamed the Hodges family for Floors Today's problems. They were rarely in the office, the company lacked internal controls and it didn't have enough capital, Kronotex claimed.

As for the Hodges family, they are back in business in England. They bought 80 Floors-2-Go stores out of the British equivalent of bankruptcy court, according to various reports last month. A check of Floors-2-Go's website didn't turn up any Kronotex products.